Taiwan's economic growth in 2015 slowed to its weakest pace since the global financial crisis, as ebbing world demand took a heavy toll on the island's exports and maintained pressure on the central bank to further cut rates. The preliminary figures released on Friday showed the economy barely emerged from a recession, and early indications suggested a bumpy outlook as slackening global demand and cooling growth in Asia's locomotive China sucked the oxygen out of Taiwan's all-important tech sector.
Gross domestic product in the final three months of 2015 contracted 0.25 percent from a year ago, according to the Directorate-General of Budget, Accounting and Statistics. That extended a 0.63 percent slump in the June-September quarter and was below expectations of a 0.25 percent contraction. Growth for 2015 slowed to 0.85 percent - the worst since the depths of the global financial crisis in 2009 - from 3.92 percent in 2014. The weak data and equally gloomy outlook will test the incoming government of Tsai Ing-wen, who led her independence-leaning Democratic Progressive Party to a landslide election victory this month.
"Exports are the big drag here given the big slowdown in China...There is definitely more easing in the cards," said Emily Dabbs, economist with Moody's Analytics in Australia. Taiwan slipped into recession in the third quarter after GDP shrank for two consecutive quarters based on a seasonally adjusted annualized rate (SAAR). GDP in the October-December period bounced 3.22 percent on SAAR basis, compared to the third quarter when it shrank 1.2 percent, indicating the economy managed to recover slightly from the recession.
The government will release final GDP numbers and details in two to three weeks. Analysts say some of the quarterly bounce appeared to come from private consumption thanks to short-term government stimulus late in 2015 and tourism-related spending. However, with the administration in transition, "there won't be any significant fiscal impulse from the government side, so we think monetary policy has to play a role now," said Angela Hsieh, an economist for Barclays Bank in Singapore.
Taiwan's central bank eased policy for the second successive time in December, and with the external environment showing no signs of improving, many analysts see another 12.5 basis point cut at its March review to spur growth. Taiwan, a major supply chain hub for global titans such as Apple Inc, has been knocked hard by the downturn in global demand. With Apple this week forecasting lower sales for the first time in more than a decade, analysts flag more uncertainty for local manufacturers.
"Taiwan's growth prospect will continue to be subject to significant downside risks in the near term," ANZ bank economist Raymond Yeung said in a note to clients. The slowdown in China has had a ripple effect across many trade-reliant economies, including Asian powerhouse exporters Japan and South Korea which are struggling to stay afloat amid a slump in shipments. Taiwan's exports in December fell for the 11th straight month, with sales to China taking a tumble.
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